Howden survey reveals SMES lose nearly one working day every month chasing late payments
Despite new government measures designed to tackle late payments, the issue continues to put significant pressure on UK SMEs, according to new research from Howden, the global insurance intermediary group.
A survey of UK businesses found that nearly one in three SMEs receive late payments often or very often, while more than half experience them at least occasionally.
Almost one in five report the problem has worsened over the past year, indicating that payment issues are still widespread.
The findings highlight the significant effect late payments place on SMEs. Almost a third of businesses spend more than six hours each month chasing overdue invoices, the equivalent of nearly a full working day lost to administrative tasks rather than growing their business.
The hidden cost of late payments
Late payments are often dismissed as an unavoidable frustration of doing business, but the consequences can be severe.
According to UK government data, late payments contribute to the closure of around 38 businesses every day in the UK, highlighting the scale of the challenge facing SMEs.
Howden’s research shows that more than a third of SMEs (34.5%) are experiencing cash flow problems because of delayed payments. The impact extends far beyond short-term financial pressures, with nearly one in seven businesses forced to delay investment and growth plans, while others defer supplier payments or rely on credit facilities simply to maintain day-to-day operations.
The effect is also being felt across the wider economy. Government-backed research found that late payments cost the UK economy almost £11bn each year, placing a significant burden on businesses and restricting their ability to invest, grow and create jobs.
While a smaller proportion of SMEs (4.3%) report delayed wages because of cash flow issues, the impact can still be significant, affecting employee satisfaction, retention and morale.
As a result, many SMEs are forced into short-term, reactive decisions that can undermine long-term stability, including:
- Nearly one in five writing off unpaid invoices entirely
- One in ten relying on overdrafts or external credit
- 6.4% are delaying hiring, directly impacting future growth
Despite these pressures, most SMEs remain in a reactive cycle of chasing payments. This highlights a gap in awareness of preventative tools such as trade credit insurance. Unlike public liability insurance, often seen as essential and sometimes a requirement to work with partners, trade credit insurance is still frequently viewed as optional or overlooked altogether. Trade credit insurance helps businesses to:
- Gain early insight into customer risk, helping prevent bad debt before it arises
- Protect cash flow through financial cover against non-payment
- Simplify debt recovery with end-to-end collections support, removing the need to chase payments internally
Robert Keene, managing director of commercial, Howden, commented: “Too many businesses are stuck reacting to late payments. Trade credit insurance changes that, giving businesses the insight to trade with the right customers, the protection when things go wrong and the support to avoid time-consuming debt recovery. Ultimately, it allows SMEs to focus on what matters most – growing their business with confidence.”